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April 24, 2012

Dutch Government Resigns Over Austerity

European turmoil spreads as Czech governing coalition shreds

Battles over austerity measures that look tame in comparison to those endured by Greeks torpedoed the Dutch government on Monday, as its prime minister tendered his cabinet’s resignation to Queen Beatrix. Not to be outdone, the Czech government came in for a crisis of its own as its coalition foundered over growing protests over austerity measures.

Reuters reported Monday that Greeks had no sympathy for the Dutch after the regular dressings-down administered to them by Jan Kees de Jager, the Dutch finance minister, particularly since the provisions sought by de Jager's government are so much less stringent than those the Greeks have endured for nearly five years.

Yields were up at a sale of Dutch bonds on Tuesday, although demand was still strong. Bloomberg reported that Prime Minister Mark Rutte planned to speak in Parliament to try to win more support for proposed changes to state pensions—a measure that had caused the collapse of the ruling coalition the day before. Rutte’s government was asked to remain in power as caretaker until elections can be held.

At stake on Monday were Dutch budget cuts totaling at least 9.5 billion euros ($12.5 billion). The government has thus far been unsuccessful at putting together a 2013 budget.

Andre Krouwel, an associate professor of political science at VU University in Amsterdam, was quoted saying, “I’m sure that behind closed doors work is being done to prevent the Netherlands from losing its credit rating, because that would only aggravate problems for the next government.” However, he added that there was “no way” the government could reach agreement prior to the election.

Tuesday also saw the prime minister of the Czech government, Petr Necas, trying to drum up support prior to an April 27 election after his own governing coalition broke apart over deficit cuts. Necas is attempting to push through tax increases and pension cuts totaling 57 billion koruna ($3 billion) to meet the European Union goal of a deficit amounting to no more than 3% of GDP.

The measures are not popular; on Saturday 90,000 people marched through Prague in protest and to demand early elections, Bloomberg reported. Political analyst Jiri Pehe, who is also the director of New York University in Prague, said in the report that such elections are a “terrifying nightmare” for all parties in the government because of declining support in opinion polls.

He was quoted saying, “None of the actors in the government crisis can afford early elections, as the Civic Democrats and TOP09 would lose ground significantly, while the Public Affairs and Peake’s [Deputy Premier Karolina Peake, who left the Public Affairs party last week] platform would be erased from the political map.”